Relação Ametódica

Data Science, Machine Learning, Artificial Intelligence, Visualization, and Complex Systems.

The El Farol Bar Problem in WallStreetBets - Reddit

reddit / wallstreetbets reminds me of the El Farol Bar Problem. Every Thursday a fixed population wants to go to the bar, unless it is too crowded. 1) if less than 60% they’ll have fun 2) otherwise they’d rather stayed at home. Now what has this to do with $gme?

The premise of the game is everybody decides to go or not in isolation. The strategy is based on historic data from previous weeks. This is a minority game where there is no winning strategy and the attendance of the Bar oscillates in characteristics patterns around 60.

The wallstreet regulators want the buyers and sellers to act in the same way. They can have historical data about the market, they can have fundamental knowledge about companies activities, but they must take individualised decisions.

A few years ago I studied the sharing of information between the agents in the El Farol Problem. The modified version introduced a variation where each agent would ask a few other agents (friends) if they were planning to go to the bar.

Then, confronted with what the majority decided (it is like an election) the agent could flip its initial decision. This made the dynamics completely different. The amplitudes of the oscillations changed dramatically.

wallstreetbets/reddit are doing just that. Users sharing information about their intentions. Each one deciding about what to do after receiving that collective map of information. This alters the dynamics of the market and the regulators hate it.

Reply @sixhat